Suppose that there is a firm that produces chairs and the firm receives an order for 80 chairs. The firm has two resources available to it. The first is a (human) worker, who must be paid $18 for each hour they spend producing chairs. The second is a robot, that costs $15 of inputs (including electricity and maintenance) for each hour it works. Chairs produced by either method are identical and of equivalent quality. Assume that the use of these two inputs is completely independent. This means that the number of hours of robot-work does not affect the productivity of the worker, and vice versa. The production of chairs based upon the numbers of hours of each of the inputs used is given below. For example, 2 hours of robot time will produce 10 chairs. 7 hours of worker time will produce 54 chairs. Robot Hours 0 1 2 3 4 5 6 7 8 9 9 10 11 12 13 14 Robot Production 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 Robot Hours 0 1 2 3 4 5 6 7 8 9 SENES 10 11 12 13 14 Worker Production 0 15 25 33 40 45 50 54 57 58 59 60 61 62 63 10. Do any of the inputs in this example exhibit diminishing returns to scale? If so, which and how do you know? If not, how do you know?

Suppose that there is a firm that produces chairs and the firm receives an order for 80 chairs. The firm has two resources available to it. The first is a (human) worker, who must be paid $18 for each hour they spend producing chairs. The second is a robot, that costs $15 of inputs (including electricity and maintenance) for each hour it works. Chairs produced by either method are identical and of equivalent quality. Assume that the use of these two inputs is completely independent. This means that the number of hours of robot-work does not affect the productivity of the worker, and vice versa. The production of chairs based upon the numbers of hours of each of the inputs used is given below. For example, 2 hours of robot time will produce 10 chairs. 7 hours of worker time will produce 54 chairs. Robot Hours 0 1 2 3 4 5 6 7 8 9 9 10 11 12 13 14 Robot Production 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 Robot Hours 0 1 2 3 4 5 6 7 8 9 SENES 10 11 12 13 14 Worker Production 0 15 25 33 40 45 50 54 57 58 59 60 61 62 63 10. Do any of the inputs in this example exhibit diminishing returns to scale? If so, which and how do you know? If not, how do you know?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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